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Unleashing The $100M Idea: Do You -- And Your Company -- Have What It Takes?

I’m often struck by how many people think theirs is the big idea that could turn into a business creating true enterprise value, with explosive growth and revenues of $100 million+. In fact, the percentage of companies that pull it off is miniscule; of the 27 million privately held businesses in the U.S. today, according to Dunn and Bradstreet, only some 13,000 have operationalized their big idea into high-growth, high-revenue reality — sustainable businesses generating $100 million+ in revenues and are also adding jobs, knowledge and growth to the economy at a rate higher than other businesses.

Why is it so hard to pull off that kind of success? Because make no mistake: it is hard, really hard, and depends not only on informed, inspired leadership, a highly desired product and a ready market, but our research on high-growth businesses at Rosemark Capital uncovered a number of subtler factors that, in various combination, bring an idea or solution to the wider world of big-time commercial success. Alternatively, not incorporating these key factors into a business model diminishes a company’s chance of unleashing real enterprise value.

Here’s the checklist of those key factors.

My product is critical to my customer – he just has to have it, either because it makes life easier or more of a pleasure; and/or it materially affects her company’s bottom line. At Rosetta, the digital marketing agency I founded in 1999, we developed a way to deliver personalized marketing programs that drove material business impact through higher ROIs, which helped elevate Rosetta to the largest independent digital agency before Publicis acquired it in 2011 for a record $575 million.

My product has asustainable, defensible position in the market. Have you created a ‘moat’ around your company, either through proprietary Intellectual property, distribution channel advantages or some other source of competitive advantage? If not, it’s only a matter of time before your competition will overtake you. At Rosetta we developed a series of proprietary insights and methodologies based on segmentation modeling and scoring tools that put us far enough ahead of our competitors.

It can scale. Your big idea can expand in a number of ways – first, by being tech-enabled, allowing your customer growth to exceed your growth in personnel; second, by expanding into adjacent services or solutions; and third, by expanding into adjacent industries and geographies. At Rosetta, we began as a professional services organization providing strategic insights through a consulting business model, serving the healthcare industry; we then expanded our industry focus to include financial services, consumer technology and the retail verticals. Next, we broadened our service offering to include digital creative, analytics and optimization, search, e-commerce and more (mostly by acquiring companies that brought us those capabilities immediately). Our revenues went from $11 million in 2004 to $45 million 2007, on our way to $130 million in the following 12 months. By 2010 we had achieved $225 million in annual revenue.

Your leadership has a high C-Q. (Cultural I.Q.) One of the key drivers we’ve found in researching highly successful companies is that their CEOs know not only how to make key strategic decisions at the right time but that their “Cultural IQ” is high in other ways too: they know how to establish and drive through the organization their personal ethos, and build a mission-based culture around it that engages the organization from top to bottom with a common goal and shared passion.

You track value-creating metrics. If this isn’t your focus, you’ll have trouble activating the right growth triggers. At Rosetta we had an obsession with measuring value creation – which we knew to be the business impact we had on our clients’ businesses – and then rewarding our managers based on how well they delivered that impact. This direct measure of client value creation also allowed us to have superior pricing and margin, expand the scope of our services and thereby drive rapid EBITDA growth and enterprise value creation, in my mind the ultimate measure of success.

In my life now as a private equity investor, my partners and I use these factors to evaluate potential portfolio companies for investment of our resources, experience and growth capital. Based on evaluating your company against these criteria, how well would you have done?

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